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Jake's View
PUBLISHED : Sunday, 02 December, 2012, 12:00am
UPDATED : Sunday, 02 December, 2012, 5:14am

KMB losses show we may need to rethink transport pricing

BIO

Jake van der Kamp is a native of the Netherlands, a Canadian citizen, and a longtime Hong Kong resident. He started as a South China Morning Post business reporter in 1978, soon made a career change to investment analyst and returned to the newspaper in 1998 as a financial columnist.
 

KMB has applied to the government for an 8.5 per cent fare increase over the next year, after it lost HK$12.5 million in the first six months this year.

SCMP, November 30

 

My relatives in Canada have a name for the bus. They call it "the loser cruiser". Bus service for them is substandard and passengers are too frequently pickpockets, drug addicts and people of erratic behaviour.

In contrast, I enjoy riding the bus into town from my home in Repulse Bay. It is a pleasure to have a frequent service, clean buses and a gentle, quiet ride. But KMB's predicament suggests we may need a complete rethink of transport pricing.

The Transport Department thought it had this problem solved some years ago with a fare-setting formula that was based on taking half the increase in the overall consumer price index and half of the increase in transport workers' wages, less a small factor for increased productivity.

But this never reflected the true cost of bus operations. It takes no account, for instance, of fuel costs and bus purchase costs. It also ignores operating conditions.

The proof is now in of how completely out of touch this formula is with reality. KMB will need an 8.5 per cent fare increase just to break even next year, says Edmond Ho Tat-man, its managing director. Some people will dispute his calculations, but I shall rely on the audit report. The company lost HK$12.5 million in the first six months this year.

As the first chart shows, there is no way the fare-setting formula can support an 8.5 per cent fare increase. Increases in both the overall CPI and transport workers' wages are running at less than 4 per cent.

The problem for KMB is not primarily costs, but operating conditions. The second chart shows a significant decline in passenger numbers over the past 10 years as a result of competing rail projects.

Increasingly clogged traffic in Kowloon has also slowed down KMB's buses, with a direct effect on revenues, while local district politicians militate against closure of uneconomic routes. The only thing the Transport Department can now do is scrap the formula entirely and come up with something that allows the bus companies to make a decent return on their investment.

But the department can also declare the formula a guideline only and say that fares will in the future be established entirely by civil servants.

In practice this will mean local politicians pushing spineless bureaucrats to allow no fare increases and keep all uneconomic routes in service, a certain formula to make bus company balance sheets shrivel.

And then we too will get the loser cruiser.

jake.vanderkamp@scmp.com

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This article is now closed to comments

michael.such.71
You're lucky Jake! Try getting the 52x to Tuen Mun at a peak hour when everyone's going home. A smelly sardine can is the nearest description I can think of,especially when the air conditioning is never cleaned. And the seasonal joys at this time of year when the unwashed winter clothes come out of the storage boxes,reeking of mothballs. Another pet name I have for this stage coach is "flu catcher" - guaranteed with the dirty plebs who cough all over the place and have their deadly viruses recycled through the air con. And,of course, the screamers on the mobile phones. Now that's what I call a "loser cruiser' and they can get rid of it anytime they want!! Cheers.
megafun
PUBLIC transport should be, and MUST be, control by the public. This is the only way the users will accept fare rises which they see as "profit-taking" by a monopoly. Economics cannot be the only basis for any route, as that will mean the distruction of basic services to remote communities. The need to subsidize routes is the same as the need to TAX the rich more in order to help the poor. If , as a society, we operates only on "money-profit" ideals, then the less able, such as our poor, will merely die! I sincerely hopes our society can be FAIR and the present public transport does not reflect fairness in so many areas - such as allowing BAD operators to squeeze profits from passengers whom essentially are the less well off in society. Returning to TAX principles, all public transport should be subsidize to help less well off, and to reduce pollution. A carbon tax or an emission tax will go a long way towards subsidizing bus public transport. This "clean tax" can be use to introduce electric buses.
megafun
in respect of "loser cruiser", our Government must drastically revamp all routes. At the same time the Gov ought to have the courage to introduce Zero Emmision Zones (ZEZ), by ONLY allowing electric-buses inside ZEZ.
likingming
That is the famous "crowding out effects" of the Govt suppressing the the Private !
captam
The Government will eventually have to buy out the three main bus companies. With ignorant ‘democratic’ politicians constantly interfering and preventing good governance of this city, this will be the only way out of this hole. The franchised buses are already receiving partial subsidies through fuel duty waiver and senior citizens fare subsidies so they may as well go the whole hog and take them over now. They have also get the buses moving freely again by elimination of traffic congestion (less cars) and this will then bring back more passengers. You simply cannot push for the mass elimination of bus routes because the railways only provide main trunks and lack convenience for many out of the way housing estates. With the population also aging Government also needs to consider that the MTR provides little comfort or seating capacity. The buses are therefore the preferred choice of the elderly as well as many of today's unhealthy junk-food eating young. Take the bus companies over now.
mcheung
Better to re-align and streamline some of the overlapping routes. There are just too many buses on roads like Nathan Road, Cheung Sai Wan Road, which have been served already by the MTR.
Agree that the MTR provides little comfort or seating capacity.
blue
I love that term "loser cruiser". I couldn't help but giggle when I read it.
xiaoblueleaf
As consumer, we enjoy the best public transport in Hong Kong: subway, buses, mini-buses and tram. With the expanded coverage of the subway system, many bus routes are either "unnecessary"; they should be cut back or service hours reduced. The guaranteed profit of the bus operators is being born by all bus riders
HK-Explorer
Each day I take the bus for 50% of my Journey. Going to and from work I never need to wait more than 1 minute for a bus to take me home. While I think this is great, the fact that the bust is maybe ~30% full makes me think that KMB can do a bit to realign bus routes and maybe have slightly less busses. Maybe I would have to wait 2-3 minutes for a bus in the future and maybe it will be a little fuller but if helps the environment and also keeps costs down then it is the best solution for HK. Those local politicians are not really helping their constituents as they are keeping pollution higher than it needs to be.
megafun
Bus routes can be better organized, BUT, our Gov is too timid to do anything about that!!

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